SAMPLE. Advanced Paper 1(a): Marketing, people and global businesses

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1 Write your name here Surname Centre Number Business Practice paper Time: 2 hours You do not need any other materials Candidate Number Other names Advanced Paper 1(a): Marketing, people and global businesses Paper reference Paper 1(a) Total Marks Instructions Use black ink or ball-point pen Fill in the boxes at the top of this page with your name, centre number and candidate number There are two sections to this question paper Answer all questions Answer the questions in the spaces provided there may be more space than you need Information The total mark for this paper is 100 The marks for each question are shown in brackets use this as a guide as to how much time to spend on each question Advice Read each question carefully before you start to answer it Try to answer every question Check your answers if you have time at the end Page 2 Edexcel A Level Business Practice Exam Paper 1(a)

2 Section A ANSWER ALL QUESTIONS IN THIS SECTION Read the following extracts (A to C) before answering Question 1. Write your answers in the spaces provided. Extract A IKEA IKEA is a home furnishings store established in Sweden and now operating in 48 countries worldwide. Founder Ingvar Kamprad discovered that flat pack furniture design is much cheaper to transport, store and saves labour costs in putting it together if the customer can do that at home. IKEA have tried to reduce the hierarchy and flattened the organisational structure in order to empower staff. For future success IKEA has to be a great place to work. Part of this is a novel two-part incremental bonus system. First, all employees can get an extra month s pay if the company meets certain specified economic goals. Second, IKEA has a loyalty program for employees. All employees who have been with IKEA for over 5 years share in this second bonus. IKEA staff work in teams and must be flexible and multi-skilled so they can help in other departments when needed. A marketing manager may spend time in the warehouse or on the till at peak periods. Nobody must have their own agenda it is all about pulling together. Former CEO Anders Dahlvig said that recognition was vital to motivate the workforce with staff having development talks 3 times a year to enable high fliers to take on new challenges such as management training. Average years service is way above similar firms at 8.5 years. At the Gateshead store alone, IKEA employ 88 full time and 245 part time staff. Zero hours contracts and temporary staff are used at peak times such as Christmas. In 2016 IKEA opened new stores in new global markets such as Suzhou and Chengdu Chenghua in China and Las Vegas and St Louis in the US. They have switched some suppliers to China in order to avoid import tariffs and lower costs. Prices had to be lowered in China to appeal to consumers on lower incomes and bowls had to be made deeper to hold more rice. Store locations in China are near cities as most customers use public transport unlike the US and European customers where locations are out of town. Sources: adapted from and Edexcel A Level Business Practice Exam Paper 1(a) Page 3

3 Extract B Selected data on China and the USA * Global ranking/189 countries China Extract C Pound falls to new low against the dollar In July 2016 the pound fell to a value of $ an all-time low for sterling. As a result petrol prices are expected to rise by 8p per litre as crude oil, traded in dollars, becomes more expensive for UK garage forecourts. Marsden Garage near Huddersfield have predicted unleaded petrol will go from 1.07 to 1.15 per litre next week although demand is only likely to fall by 2%. Sources: adapted from USA Population 1.4 bn m GDP/capita US$ 7,590 54,629 Annual GDP growth % Ease of doing business * 84 7 Infrastructure spending as a percentage of GDP 8.6% 2.5% Wage growth 9.5% 3% Page 4 Edexcel A Level Business Practice Exam Paper 1(a)

4 Section B ANSWER ALL QUESTIONS IN THIS SECTION Read the following extracts (D to G) before answering Question 2. Write your answers in the spaces provided. Extract D Jaguar Land Rover seals Chinese joint venture Britain s luxury car maker Jaguar Land Rover (JLR) has sealed a joint venture with Chinese company Chery Automobile, setting up a factory together in the world s second largest economy. China is now JLR s largest market. They were previously making the cars in Liverpool and exporting with a shipping time of around 5 weeks. Making JLR vehicles within China avoids a tariff of around 100% on imported cars. It also gives much more production capacity to serve Asian markets. The investment from the joint venture will include a new manufacturing plant in Changshu, near Shanghai. The two companies will also provide a new research and development and engine production facility. Under Chinese law a car manufacturer from outside China is only entitled to up to 50% of any production ownership in China, enabling Chinese firms to improve their knowledge by partnering with foreign firms. Models will be specifically tailored for the Chinese market. The joint venture will blend together the heritage and experience of luxury premium vehicle manufacturer Jaguar Land Rover with the intricate knowledge and understanding of Chinese customers evident at Chery, JLR said. Many other firms like BMW are finding success in the Chinese market and it is important to keep ahead of the rivals. Some consumers are concerned that Chery s weak reputation for quality will affect the image of the cars. The affluent Chinese middle classes still aspire to buy Western goods and were willing to pay the higher prices of JLR cars exported from Liverpool. Source: adapted from Chinese-joint-venture.html Edexcel A Level Business Practice Exam Paper 1(a) Page 13

5 Write your name here Surname Centre Number Business Practice paper Time: 2 hours You do not need any other materials Candidate Number Other names Advanced Paper 2(b): Business activities, decisions and strategy Paper reference Paper 2(b) Total Marks Instructions Use black ink or ball-point pen Fill in the boxes at the top of this page with your name, centre number and candidate number There are two sections to this question paper Answer all questions Answer the questions in the spaces provided there may be more space than you need Information The total mark for this paper is 100 The marks for each question are shown in brackets use this as a guide as to how much time to spend on each question Advice Read each question carefully before you start to answer it Try to answer every question Check your answers if you have time at the end Page 2 Edexcel A Level Business Practice Exam Paper 2(b)

6 Section A ANSWER ALL QUESTIONS IN THIS SECTION Read the following extracts (A to E) before answering Question 1. Write your answers in the spaces provided. Extract A ECB cuts eurozone interest rate to zero to jump-start economy Going further than economists had expected, the Frankfurt-based European Central Bank (ECB) cut the Eurozone s main interest rate from 0.05% to zero, initially prompting a sharp drop in the euro against the pound and the dollar. Sources: Extract B Extract from the Budget for Propercakes Ltd, June & July 2015 June ( ) July ( ) Budget Actual Variance Budget Actual Variance Sales Revenue 132, ,340 6,110 A 159, ,850 18,370 A Costs Fixed Costs 12,110 12, A 12,110 12, A Wages 32,060 30,240 1,820 F 34,180 30,000 4,180 F Other Variable Costs 51,810 47,740 4,070 F 68,510 52,070 16,440 F Total Costs 95,980 90,180 5,800 F Profit (or Loss) 36,470 36,160 Edexcel A Level Business Practice Exam Paper 2(b) Page 3

7 Extract C Chevron Oil Corporation Chevron Oil Corporation is scaling down its Asia operations, selling assets valued at up to $5 billion. The company is looking to raise up to $10 billion globally from asset sales, a big chunk of which will come from its Asian upstream operations in order to adapt to an environment of lower oil prices. The proposed sales would mark a meaningful reduction in Chevron s footprint in oil and gas production in Asia. Chevron s retrenchment in Asia comes as the global energy industry continues to cope with an oil-market slump that earlier this year sent prices to a 12 year low. Sources: Extract D National Health Service A recent study from the charity The Point of Care Foundation claims that increased employee empowerment within the National Health Service (NHS) could have a direct impact on care quality and patient outcomes. It said that patient satisfaction was consistently higher with better rates of staff health and wellbeing. The report also revealed a link between higher staff satisfaction and lower rates of mortality and hospitalacquired infection. Sources: Page 4 Edexcel A Level Business Practice Exam Paper 2(b)

8 Extract E Tim Cook s Epic Growth Challenge at Apple One of the great business leadership challenges of recent years is playing out before us now, widely unappreciated for what it is. That s a bold claim but easily justified. This is the growth challenge facing Apple CEO Tim Cook. Investors are lowering their estimate of Apple s value. In May 2015, they thought the company was worth $740 billion. In January 2016, they think it s worth $568 billion. The reason is that they believe Apple has become an iphone company; without that incredible hit product, Apple s revenues wouldn t have increased at all last year, and the iphone now accounts for 66% of Apple s total sales. So Cook faces a mammoth challenge: finding ways to make the world s most valuable company even more valuable when it s already so big that conventional growth strategies such as product development would barely move the needle. That s why we shouldn t be surprised by reports (unconfirmed) that Apple is getting into the autonomous car business and may buy Tesla. The car business is at least big enough to provide noticeable growth for Apple. Sources: Edexcel A Level Business Practice Exam Paper 2(b) Page 5

9 1 (a) Explain how the ECB s decision to cut the main interest rate might benefit firms based in the Eurozone. (b) Using the data provided in Extract B, calculate the profit variance for July only. (4 marks) (4 marks) Page 6 Edexcel A Level Business Practice Exam Paper 2(b)

10 (c) Assess the likely benefits to Chevron Oil Corporation of undertaking a sale of assets in Asia. (10 marks) Edexcel A Level Business Practice Exam Paper 2(b) Page 7

11 Extract I Profits at John Lewis tumble The John Lewis Partnership has scaled back expansion plans at its Waitrose supermarket chain and said that staff numbers would fall after reporting a sharp drop in first-half profits. Pre-tax profit for the partnership for the six months to the end of July fell 14.7% to 81.9m and John Lewis have warned of further job losses as the business looks to improve the groups profits, especially given the rapid shift towards online shopping. Sales rose by 3.1% but profit has been held back by intense price competition (mainly in the grocery sector), pay increases to staff, IT costs and a new distribution network that includes a 150m extension to the groups Milton Keynes Depot. Sir Charlie Mayfield, the employee-owned partnership s chairman, said Our commitment to competitive pricing, excellent service, increasing pay and investing in the long term have held back profits. Source: Page 16 Edexcel A Level Business Practice Exam Paper 2(b)

12 Question Number 1 (c) Indicative content Knowledge 2, Application 2, Analysis 3, Evaluation 3 Sale of assets is a method for a business to raise finance in order to expand or to improve cash flow Chevron can scale back operations in Asia through sale of assets in the region This will allow the company to reallocate finances to other profitable areas of the business This is in light of a global fall in oil prices which has affected the ability for oil projects to generate sufficient returns Selling assets could allow the business to reassess its objectives and scale back less profitable ventures Potential counterbalance There is an argument that oil prices will eventually return to pre-slump prices so a sale of assets in this sector will result in an ability to regain market presence in Asia Raising finance in the form of selling assets could impact on staff morale as workers may feel their job security is at risk Potential judgement The decision to sell assets allows a cash injection to the business which is less risky than sourcing finance externally from banks and other institutions Whether the benefits will be realised depend on the likelihood of oil prices remaining low Level Mark Descriptor Level 1 Level A completely inaccurate response. Isolated elements of knowledge and understanding recall based. Weak or no relevant application to business examples. Generic assertions may be presented. Elements of knowledge and understanding, which are applied to the business example. Chains of reasoning are presented, but may be assertions or incomplete. A generic or superficial assessment is presented. Mark (10) Edexcel A Level Business Practice Paper 2(b) Mark Scheme Page 3

13 Level Mark Descriptor Level 3 Level 4 Question Number 1 (d) Accurate and thorough knowledge and understanding, supported throughout by relevant and effective use of the business behaviour/context. Analytical perspectives are presented, with developed chains of reasoning, showing cause(s) and/or effect(s). An attempt at an assessment is presented, using quantitative and/or qualitative information, though unlikely to show the significance of competing arguments. Accurate and thorough knowledge and understanding, supported throughout by relevant and effective use of the business behaviour/context. A coherent and logical chain of reasoning, showing cause(s) and/or effect(s). Assessment is balanced, wide ranging and well contextualised, using quantitative and/or qualitative information, and shows an awareness of competing arguments/factors leading to a supported judgement. Indicative content Knowledge 2, Application 2, Analysis 4, Evaluation 4 Empowerment is the extent to which employees have control over the work they do and the decisions that they can make at work Increased employee empowerment can result in increased performance at work in terms of quality and productivity The report also revealed a link between higher staff satisfaction and lower rates of mortality and hospital-acquired infection A happier and healthier workforce can reduce absenteeism rates and this can lead to less need for contingency staff and overworking of other employees to cover absences Potential counterbalance The methods to improve employee empowerment, for example, through training, can be expensive and the NHS is subject to strict budgetary controls as it is a public sector organisation NHS employees may feel that they are been given more work and responsibility for no extra pay which in turn could lead to staff dissatisfaction Potential judgement Employee empowerment is resulting in a happier and more effective workforce which is also having a positive impact on patients Empowerment requires staff to be willing to change and accept new roles and responsibilities which they may not want to accept Mark (12) Page 4 Edexcel A Level Business Practice Paper 2(b) Mark Scheme

14 Level Mark Descriptor Level 1 Level 2 Level 3 Level A completely inaccurate response. Isolated elements of knowledge and understanding recall based. Weak or no relevant application to business examples. Generic assertions may be presented. Elements of knowledge and understanding, which are applied to the business example. Chains of reasoning are presented, but may be assertions or incomplete. A generic or superficial assessment is presented. Accurate and thorough knowledge and understanding, supported throughout by relevant and effective use of the business behaviour/context. Analytical perspectives are presented, with developed chains of reasoning, showing cause(s) and/ or effect(s). An attempt at an assessment is presented, using quantitative and/or qualitative information, though unlikely to show the significance of competing arguments. Accurate and thorough knowledge and understanding, supported throughout by relevant and effective use of the business behaviour/context. A coherent and logical chain of reasoning, showing cause(s) and/or effect(s). Assessment is balanced, wide ranging and well contextualised, using quantitative and/or qualitative information, and shows an awareness of competing arguments/factors leading to a supported judgement. Edexcel A Level Business Practice Paper 2(b) Mark Scheme Page 5

15 Question Number 1 (e) Indicative content Knowledge 4, Application 4, Analysis 6, Evaluation 6 Indicative content option 1 It is clear that investors are concerned about the over-reliance of Apple on their signature product, the iphone. This is demonstrated by figures showing a fall in value of the firm If sales of the iphone are ignored, then the company would have not increased revenue in the last year. This indicates a need to consider investment within the rest of the company s product portfolio Diversification represents high risk however Apple s global brand recognition is strong enough to enter new markets with new products Rumours surrounding Apple s interest in the automotive industry (in particular the autonomous car business) indicate a willingness to spread risk and shift sole focus away from the iphone Indicative content option 2 The iphone is a proven market leader and its ability to constantly reinvent itself is shown by the recent release of the iphone 7 The product s ability to extend its life cycle (through extension strategies) has resulted in the product accounting for 66% of the entire company s revenue Technological and social trends suggest that customers are viewing internet content primarily through mobile devices. This trend indicates that customers view mobile smart phones as they preferred technological device. A strategy of product development strategies is considered lower risk than diversification especially given the strength of the iphone and Apple brand The achievement of success in the autonomous car business may not be realised for a number of years into the future Potential recommendations There are arguments that suggest that the minor improvements to the iphone in each new model isn t sufficient to promote long term success for the world s most valuable company Expectations of investors are so high that diversifying may be the preferred option to keep shareholders interested Long term growth being achieved in new markets is perhaps more advisable than focusing on an already saturated smart phone market Apple s large cash reserves would support the huge investment required to move into new industries such as autonomous cars Perhaps the iphone represents the firm s cash cow which should continue to be the company s flagship product Mark (20) Page 6 Edexcel A Level Business Practice Paper 2(b) Mark Scheme